Indonesia’s New Tax Hike Impacts Car Prices
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A recent 12 percent increase in indonesia’s Value Added Tax (VAT) is set to impact the price of several popular car models, particularly those in the Low Cost Green Car (LCGC) segment.This increase affects vehicles already subject to Indonesia’s Sales Tax on Luxury Goods (PPnBM).
The price increases are directly linked to the government’s decision to raise the VAT. This means consumers can expect to pay more for popular models like the Agya, Brio Satya, Calya, Ayla, and sigra.
Finance Minister Sri Mulyani explained the tax changes at a recent press conference.”Then the luxury cruise ship group, except for public transportation such as cruises and yachts, is subject to 12 percent, and motorized vehicles which are already subject to PPnBM. So those are the only ones subject to 12 percent, the others are not,” she stated.
Rustam Effendi, an Associate Expert Policy Analyst at Indonesia’s ministry of Finance’s Fiscal Policy Agency, confirmed the impact on LCGC vehicles. He specifically noted that the five models mentioned above will see a price increase due to the VAT hike.
the Indonesian Minister of finance Regulation number 141/PMK.010/2021 outlines the specifics of the PPnBM tax. This regulation details which vehicles are subject to the tax and how it’s calculated. Currently, LCGC vehicles are subject to a 15 percent PPnBM rate, with a tax base of 20 percent of the selling price (resulting in a 3% effective tax).
Though, the PPnBM rates vary for other vehicles, depending on their emissions.Interestingly, battery electric vehicles (BEVs) and fuel cell electric vehicles are classified as luxury goods but are exempt from PPnBM, highlighting the government’s push towards greener transportation.
Article 16 of the PMK further clarifies this exemption: “The group of taxable goods that are classified as luxury are motorized vehicles which are subject to PPnBM at a rate of 15 percent with a tax base of 0 percent (15% x 0%) of the selling price, namely motorized vehicles which are included in the motorized vehicle program that uses battery electric vehicle technology or fuel cell electric vehicles.”
While this situation is specific to Indonesia, it offers a glimpse into the complexities of global automotive taxation and the potential impact of government policies on consumer prices. Similar tax adjustments in other countries could lead to comparable effects on vehicle affordability.
(Source: Compiled from various Indonesian government sources)
Indonesia’s VAT Hike: impact on Car Prices in the LCGC Segment
Indonesia’s recent move to increase its Value Added Tax (VAT) has triggered a ripple effect across the automotive industry, especially impacting the prices of popular Low Cost Green Cars (LCGC). World Today News Senior Editor, Sarah Jenkins, sits down with automotive industry expert, Dr. Dyah Permata, to delve deeper into the implications of this tax change for Indonesian consumers.
Interview: Indonesia’s VAT Hike: Impact on LCGC Vehicle Prices
Sarah Jenkins: Dr. Permata, thank you for joining us today. Could you give our readers a brief overview of the recent VAT increase and its implications for the Indonesian automotive market?
Dr. Dyah permata: It’s a pleasure to be here, Sarah. Indonesia has implemented a 12 percent increase in its Value Added Tax, which directly impacts the price of several goods and services, including automobiles. What’s particularly noteworthy is the effect on vehicles within the LCGC segment.These cars were already subject to Indonesia’s Sales Tax on Luxury Goods (PPnBM), and the VAT increase adds an additional layer of cost.
Sarah jenkins: So, this means consumers can expect to see a noticeable rise in the prices of their favourite LCGC models?
Dr. Dyah Permata: Sadly, yes. Models like the Agya, Brio Satya, Calya, Ayla, and Sigra are all potential candidates for price increases. This is directly tied to the VAT hike compounded with the existing PPnBM, making these vehicles slightly less affordable.
Sarah Jenkins: This raises an captivating point – the Indonesian government has acknowledged the push for greener transportation and even exempts battery electric vehicles from PPnBM. Is there any long-term strategy behind these seemingly contradictory policies?
Dr. Dyah Permata: There’s definitely a complex interplay at work. On one hand, the government wants to encourage the adoption of electric vehicles to reduce emissions. On the other hand, the VAT increase is part of a broader revenue-generating strategy. The key takeaway is that while the government incentivizes greener alternatives, the overall tax habitat might offset some of those benefits for consumers opting for more customary models like LCGC vehicles.
Sarah Jenkins: Dr. Permata, thank you so much for shedding light on this crucial issue. It highlights the complexities of balancing economic needs with environmental concerns in the Indonesian automotive market.
